StartEngine is a platform that allows startups to raise money in exchange for equity, one of about three dozen that emerged after a recent change in SEC rules that loosened up restrictions around investing. The company has completed funding rounds for 51 companies ranging from $16.9 million for automobile designer Elio Motors to $628,000 for agricultural startup Green Sense Farms. But last month it announced a strikingly self-referential investment opportunity: the chance to become an investor in StartEngine itself.

StartEngine isn’t the only equity crowdfunding venture to offer investments in itself. Earlier this year FundPaas, which offers software to run equity crowdfunding sites and operates its own investment platform called CustVestor, announced a similar arrangement in a typo-laden press release. UK site Crowdcube ran a similar funding round last year. And Wefunder, another similar company, has raised about $7 million from its own users, according to founder Nicholas Tommarello.

“We eat our own dog food,” said Tommarello. “We believe that there is value in having customers invest in businesses they love, so it would be highly hypocritical if we did not do it ourselves.”

But the arrangement can also sound like the venture capital equivalent of ouroboros, the serpent eating its own tail — and raises questions about whether the nascent industry is attracting enough investment to maintain cash flow. Tommarello predicted in an email that the majority of equity crowdfunding sites will fail within the next year, and some users are pushing back.

“Did I miss the part where you explain how my investment in StartEngine creates a return for me?” asked a commenter named Cory Vinyard on the StartEngine investment page. Another fretted that the pitch sounded like “snake oil salesman tactics.”

There are signs that many regulation crowdfunding platforms are less than healthy.

The Jumpstart Our Business Startups Act made it possible for everyday people to invest in startups in 2012, which raised the exciting possibility that amateur investors could funnel money into experimental startups that traditional venture capital groups would pass over.

But the SEC took four years to implement rules about how the process would work, and since then a glut of would-be platforms has emerged. The Financial Industry Regulatory Authority or FINRA, a non-governmental organization that regulates exchange markets and brokerage firms, currently lists 35 similar sites.

There are signs that many are less than healthy. Avonto, a platform started this year, currently doesn’t list a single offering. Neither does FundMe, which launched last year. CrowdSource Funded lists just one investment opportunity, for a cafe in Illinois, which has raised zero dollars. Wunderfund also lists a solitary offering, for a “beard wash” that “will be worth more than $2,500,000.00 in the future” but has so far raised just $2,900. FlashFunders, which attracted press coverage from TechCrunch and The New York Times, hasn’t posted a news update since 2016, Hydcrowd’s site says it’s “down for essential maintenance,” Neighbor Capital’s site has been in “maintenance mode” since April of this year, and Equifund’s upcoming offerings still contain lorem ipsum text.

The overall lack of regulation in equity crowdfunding has attracted criticism. One expert called the concept a “disaster waiting to happen.” A British regulatory body chided the industry for providing “misleading or unrealistically optimistic impression of the investment.”

Even the most successful sites can be magnets for ventures with business models that make it difficult to secure funding through traditional avenues. Everipedia, a trollish knockoff of Wikipedia that draws traffic by creating invasive entries about the victims of mass tragedies, raised nearly $130,000 on Wefunder. Gab, a Twitter clone that courts users from the alt-right, raised more than $1 million on StartEngine earlier this year.

Howard Marks, the CEO of StartEngine, responded to a question about equity crowdfunding sites raising money on their own platforms in philosophical terms.

“If many crowdfunding platforms are not experiencing success, that is ok because they either tried and did not find success or they are still trying hard to figure out a path to success,” he said.

But back on StartEngine’s investment page for itself, which is written in the inspirational tone of an infomercial — “It's like Shark Tank, except you’re the shark” — it’s difficult not to fixate on commenters’ seeming lack of preparedness.

“How will we make money off investment?” asked a would-be investor named Glenn Skyles. “Hopefully not a stupid [question].”

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